Extent of hedging in the US lodging industry

This study investigates the extent of hedging in a sample of lodging firms over a five-year period from 2000–2004. The findings document that lodging firms predominantly use interest rate swaps and options to manage interest rate risk exposure. Lodging firms primarily use these instruments as cash flow hedges of their long-term debt liability. The findings indicate that the hedging decision should be modeled separately using a two-step model. The results are robust to alternative specifications and provide evidence to show financial leverage, floating rate debt, information asymmetry, firm size, cash flow volatility and diversification, to be significantly related to the amount of hedging.     

Internationalization and exposure to foreign currency risk: An examination of lodging firms

Corporate internationalization has often been linked with exposure to risk arising from foreign currency valuation. The theory of economic exposure, however, postulates that when demand and activities are sensitive to purchasing power parities, the value of domestic firms can also be influenced by exchange rates. Suspecting that domestic lodging firms are subject to foreign currency risk, the current study applied a cash-flow model in order to quantify the operating exposure of US lodging firms against currencies that significantly account for visitors to the U.S. Heckman's two-step estimation was subsequently used to examine the effect of internationalization on estimated exposure coefficients. The results indicated that domestic firms are more likely to sustain foreign currency risk, as multinationals may be capable of diversifying away the risk. The higher foreign sales ratio of lodging firms led to greater foreign currency risk, while the increased degree of operational hedging and franchising mitigated the foreign currency risk of multinational lodging firms.     

The relationship between interest rate and tourism activities

Investment theory proposes that interest rate affects an individual's cross-time consumption decision. This study examines the impact of interest rate on air travel, national park stay and restaurant patronage, as compared with its impact on two non-tourism consumption activities. The findings suggest that interest rate has a negative impact on tourism activities involving significant amounts of time and money.     

Dividend behavior of lodging firms: Heckman's two-step approach

This study examines lodging firms’ dividend behavior with a framework that clearly distinguishes between the two steps of dividend decisions: whether or not to pay and how much to pay. This study also investigates how firm characteristics influence the payment and amount decisions of dividends. Heckman's two-step approach is used for data analyses because it can differentiate between the two stages of dividend decisions, precluding potential sample selection bias. Results imply that the way in which firm characteristics affect the two steps of dividend decisions are indeed different. The payment of dividends is determined by many firm financial characteristics, the previous year's dividend amount, and some external year-specific events. The variation in the amount of dividends, by contrast, is not explained by such firm characteristics. Only the previous year's dividend amount and some year-specific events have a significant impact on the decision of dividend amount. Results also present some interesting findings, which may contribute to a better understanding of lodging firms’ unique dividend behavior.     

Revisit to the determinants of capital structure: A comparison between lodging firms and software firms

This study validates the contradiction between capital structure theories and previous empirical studies, and it further identifies lodging firms’ unique leverage behavior through a comparison to software firms, using a generalized least squares analysis. This study also explores the joint effects of key financial leverage determinants. The findings indicate that fixed assets, growth opportunities, and the joint effect of these two variables are the significant long-term debt determinants of the lodging industry. The analysis of the joint effect also suggests that fixed assets and growth opportunities affect each other's relationship with long-term debt usage. With the findings on lodging firms’ unique financing rationale, authors hope to provide useful information for corporate financial planners and lending institutions regarding debt-financing behavior.     

Determinants of weather derivatives usage in the Austrian winter tourism industry

This study investigates the motivations, concerns and obstacles regarding the use of weather derivatives in the winter tourism industry. The findings from the interviews with 61 ski lift operators in Austria indicate that while the majority of operators are aware of weather risks and report substantial weather exposure, using weather derivatives as a means of offsetting potential loss is rarely considered. This is primarily due to a lack of awareness and knowledge, but on becoming aware of the availability of such instruments ski lift operators express interest in their possible use. The task is thus to increase awareness, knowledge and support for the ski lift operators with reference to the use of weather derivatives.     

Foreign exchange exposure of US tourism-related firms

To date, literature on foreign exchange risk has paid a particular attention to multinationals in trade-related industries. The tourism sector is also sensitive to the exchange rates between travelers’ home countries and their destinations. Suspecting that the exposure of domestic tourism-related firms to foreign exchange risk results from price elasticity of demand, the current study tested the cash flow exposure of sample firms, accounting for nonlinearity, asymmetry, and lagged effects. As a result, a significant percentage (78%) of domestic tourism-related firms was found to have significant foreign exchange exposure. This study also found that exchange rate exposure for tourism-related firms was nonlinear, asymmetric, and lagged. The evidence implied that several tourism-related firms are passive regarding their exposure and may face financial burdens caused by demand fluctuations. Implications and suggestions are presented along with the findings of the study.     

The use of lodging ratios in tourism

This paper presents an analysis of the lodging industry in Victoria, Canada, using standard accounting procedures. It provides detailed information on the supply side of the tourist industry. Meaningful categories were derived by categorizing the sample of hotels and motels into four groups according to their ratios of food and beverage sales to room sales rather the conventional aggregations used by the lodging industry. Cost-volume-profit (C-V-P) analysis was used to compare the break-even charts of the four groups. Information on risk was also obtained by an extension of the analysis using probabilistic C-V-P measures. It is concluded that information at this level of aggregation is important to decision-makers involved in overall tourism planning as well as to management of individual facilities.     

Product diversification and property performance in the urban lodging market: The relationship and its moderators

In this study, we investigate the relationship between product diversification and hotel property performance as well as the moderators of this relationship in the urban lodging market. Using stochastic frontier analysis with panel data, we calibrate the efficiency scores of 377 urban hotels in Beijing from 1994 to 2005. We then investigate the impact of product diversification on performance as measured by efficiency score. Results from panel data models indicate that the degree of product diversification exhibits a positive relationship with hotel performance. Hotel location, diversification expansion rate, and foreign ownership/operation are found to be significant moderating factors determining the effect of product diversification. Specifically, hotels that (a) are located farther from the city center, (b) expand diversification more slowly, and (c) are domestically owned are more likely to leverage the benefits stemming from product diversification. We provide a series of practical evaluation modules to help hoteliers improve performance.     

The ADR rule-of-thumb as predictor of lodging property values

In a positive context, asset valuation models may be judged on the basis of their predictive ability rather than on the number and elegance of the underlying assumptions. The Average Daily Rate (ADR) rule-of-thumb has been used for decades as a quick way of estimating hotel and motel room rates and, more recently, as a simple gross-income multiplier model for predicting values of lodging properties. This study examines how well the ADR rule-of-thumb model predicts property values. The results of our comparative analysis of estimates from the ADR model with those from a hedonic valuation model indicate that the ADR model performs well in the aggregate, but is an inconsistent estimator at various levels of disaggregation, such as when property subsamples were organized by number of rooms, age, occupancy rate and number of restaurants.     

The long-run impact of exchange rate regimes on international tourism flows

Notwithstanding the systematic inclusion of an exchange rate variable of some form in studies examining international tourism flows, hardly any research has been carried out to test for a possible exchange rate regime effect. Drawing from recent advances in exchange rate regime classifications, this paper begins to fill this gap by investigating the impact of exchange rate regimes on international tourism flows. The study employs a system generalized methods of moments (SYS-GMM) estimation for tourist arrivals on a panel of 27 Organization for Economic Co-operation and Development (OECD) and non OECD countries for the period 1980–2011. The results identify multiple exchange rate regime effects and support the importance of maintaining a relatively stable exchange rate to attract international tourist arrivals.     

A quarantined lodging stay: The buffering effect of service quality

How do guests feel during their stay at quarantine lodging? This study draws on terror management theory and social exclusion theory to synthesize a model that highlights guests’ perceptions about their experience under enforced isolation. The model articulates guests’ feeling of anxiety and loneliness, whereas quality of service presents warmth and care that activates an anxiety buffer mechanism that mitigates the effect of anxiety. In turn guests’ level of anxiety is further explained by an interaction between their health status and the length of stay. Results point to a conduit for studying the dark side of hospitality, opening up research avenues that could help assess broader social behavioral changes during the global pandemic, while offering operators revelations for lodging management during a crisis.     

The value of cash holdings in hotel firms

Extant research in finance suggests asymmetric information increases the cost of external financing substantially and creates underinvestment problems. While franchising might reduce underinvestment problems, it might exacerbate overinvestment problems in poorly-governed firms. Using combined postulations from both the pecking order theory and the free cash flow theory, this study examines the value of cash holdings in hotel firms and the extent to which franchising, financial constraints, and corporate governance affect this value. The findings suggest that cash can be a curse and a blessing; cash is more valuable for financially constrained firms than for unconstrained firms and less valuable for poorly-governed firms than for well-governed firms. Also, financial constraints have a greater effect on the value of cash holdings than weak corporate governance. Although franchising could solve underinvestment problems, it makes poorly-governed firms more vulnerable to overinvestment. Practical and theoretical implications are discussed within realms of corporate finance and franchising.     

The impact of gasoline price fluctuations on lodging demand for US brand hotels

Analyzing US brand hotels, over a 13-year period, this study provides empirical evidence of a significant negative relationship between gasoline prices and demand for certain lodging products, controlling for economic factors (i.e. gross domestic product and population density). Applying principles from microeconomic demand theory to the literatures on gasoline price elasticities, consumer demographics and lodging demand, a set of hypotheses were devised to test the relationship between gasoline prices and lodging demand for specific hotel locations and price segments. Using fixed effects models, the results reveal that lodging demand decreases as gasoline prices rise in all segments except upper-upscale and all locations except urban areas. Hotels in midscale without food and beverage and economy market segments, in resort, suburban and highway locations, exhibit the greatest association between gasoline price shifts and demand. Implications of these findings are discussed for both hospitality research and practice.     

The impact of infectious diseases on hotel occupancy rate based on independent component analysis

The recent global outbreak of Influenza A (H1N1), or the more commonly known as swine flu, has negatively affected the tourism and hospitality industries in many countries. This article reports a study that applied independent component analysis, a novel statistical technique, to separate the dominant factors which determine the levels of hotel occupancy rates in Hong Kong. Empirical findings would provide useful insights on how the dynamic lodging demand reacts to epidemics based on the severity and duration of the events.     

The relationship between board diversity and firm performance in the lodging industry: The moderating role of internationalization

Following the emphasis on board diversity and its roles on firm performance, an examination on the relationship between board diversity and firm performance in the lodging industry is conducted. Further, this study employs internationalization, a moderator, to more comprehensively investigate the board diversity-firm performance relationship. This study found that gender diversity shows a positive and significant effect on firm performance while age diversity has an insignificant effect on firm performance. Regarding the moderating effect of internationalization, the degree of internationalization significantly magnifies the effect of gender diversity on firm performance but insignificantly moderates the effect of age diversity on firm performance. This study attempts to contribute to the hospitality and tourism literature by examining the topic that has been rarely dealt with and provide practical guidelines for stakeholders of a lodging firm especially when selecting board members.     

Revisiting the financing behavior of restaurant firms: The firm-size perspective

In International Journal of Hospitality Management, Jang and Ryu [Jang, S., Ryu, K., 2006. Cross-balance sheet interdependencies of restaurant firms: a canonical correlation analysis. International Journal of Hospitality Management 25 (1), 159–166] published a research article about the financing behavior of restaurant firms, using a canonical correlation analysis. Even though the study presents a general picture of financing in restaurant firms, the financing behaviors of firms of different sizes may differ because they often face different financing environments. Thus, this study re-examines restaurant firms and compares the results with Jang and Ryu [Jang, S., Ryu, K., 2006. Cross-balance sheet interdependencies of restaurant firms: a canonical correlation analysis. International Journal of Hospitality Management 25 (1), 159–166] to further enhance the understanding of the financing behaviors. The results show that, despite the differences in firm sizes, overall financing behaviors are similar to those reported by Jang and Ryu [Jang, S., Ryu, K., 2006. Cross-balance sheet interdependencies of restaurant firms: a canonical correlation analysis. International Journal of Hospitality Management 25 (1), 159–166], although they also suggest that restaurant firms of different sizes do indeed exhibit some different cross-balance sheet interdependencies including relatively more reliance on accounts payable among small and medium firms and more use of long-term debts among large firms. Moreover, long-term assets related to stockholder equity more among large firms but related to supplier credit more among small and medium firms.     

Marketing decisions,customer reviews,and business performance: The use of the Toprural website by Spanish rural lodging establishments

Modern travelers often rely on reviews provided by other consumers online, or electronic word of mouth (eWOM), to choose their accommodations. This study considers the effects of marketing decisions by rural lodging establishment owners (i.e., price and advertising expenditures) on eWOM (i.e., ratings and number of reviews), as well as the effects of eWOM on business performance. The results rely on marketing data and customer reviews obtained from a leading rural tourism infomediary website, related to 202 Spanish rural lodging establishments. A complementary survey also provided information about the lodging establishments' performance. The study thus reveals that price and advertising expenditures affect eWOM; in turn, eWOM affects business performance. Moreover, owners' experience with the infomediary slightly moderates the link between eWOM and performance.     

The real estate risk of hospitality firms: Examining stock-return sensitivity to property values

The value of a hospitality firm is often believed to be dependent on the market price of the properties they own. However, the core business of a hospitality firm is the production of products and services. Since the real estate assets are depreciated throughout their useful life, short-term covariance of firm value with real estate prices seems implausible. Using a two-factor model, the current study examined the real estate exposure of US hospitality firms through daily stock return data from 2005 to 2009. Results indicate that the majority (88%) of the hospitality firms were exposed to real estate risk at some point during the sample period, while the second-stage analysis of real estate betas suggests that exposure is conditional on the financial status of the hospitality firm. Implications and suggestions for future research are presented with the findings of the study.     

Corporate social responsibility and systematic risk of restaurant firms: The moderating role of geographical diversification

Despite growing attention to corporate social responsibility (CSR) in the tourism literature, the relationship between CSR activities and systematic risk, one of the critical components in evaluating shareholder value, has been a topic of scarce examination. Further, the moderating role of geographical diversification on the link between CSR and systematic risk in the restaurant context has not been studied. Therefore, the current study explores these issues in the restaurant context based on the organizational theory and stakeholder theory. In addition, this study dichotomizes CSR activities into two dimensions, socially responsible activities (i.e., positive CSR) and socially irresponsible activities (i.e., negative CSR), to examine the separate effects of the two dimensions. A two-way fixed-effects model that effectively accounts for unobserved effects in a panel data set has been employed to test the proposed hypotheses.